Oil prices edge up on short covering, gasoline jumps

[NEW YORK] Oil prices rose slightly on Wednesday as investors covered short positions when a big rise in US crude inventories was not as massive as many had feared, while gasoline futures jumped more than 3 per cent after a surprise decline in inventories of the fuel.

US crude stocks rose 13.8 million barrels in the last week as refineries cut output, while gasoline stocks decreased, the Energy Information Administration said. The rise did not shock the market, since preliminary data from the American Petroleum Institute (API) late on Tuesday showed an even bigger increase.

"A lot of the downside was already priced in," said Rob Haworth, senior investment strategist at US Bank Wealth Management. "In the near-term, this is going to become a technical game of price levels and where speculators are going to capitulate. If we start to get through the lows of January, that could force some speculators to retrench their position."

Hedge funds and other speculators raised their net long US crude futures and options positions in the week to Jan 31 to the highest level on record, data from the US Commodity Futures Trading Commission showed last week.

International Brent crude futures were trading at US$55.17 per barrel by 12.31pm EST (1731 GMT), up 12 cents or 0.2 per cent from their previous close.

US West Texas Intermediate (WTI) crude was at US$52.32 a barrel, up 15 cents or 0.3 per cent.

Gasoline futures jumped 3.5 per cent to a session high of US$1.5395 a gallon after EIA data showed a surprise decline in inventories last week after five straight weeks of increases.

"The crude oil inventory build was really terrible for the market but the market does not seem to care because the products inventories were better than expected and are dragging crude oil prices up with it," said Andrew Lipow, president of Lipow Oil Associates in Houston.

Analysts said prices could be volatile as growing US crude supplies offset output cuts by the Organization of the Petroleum Exporting Countries (Opec) and other producing nations.

Rising US output is not worrying Opec for the time being, Qatari Energy Minister Mohammed al-Sada told Reuters, saying "the demand is healthy."

Oil prices came under pressure early as Reuters calculations based on official data showed China's 2016 oil demand grew at its slowest pace in at least three years.

REUTERS